The new drivers of wealth in today’s society are knowledge-based assets.[1] Throughout the history of human civilization, wealth was based on the possession of physical assets. Today, knowledge has become the new wealth. With the growing realization of the hidden value of intellectual property (or IP), companies are increasingly managing and wielding their IP, not just as defensive protection against intellectual theft, but as an active and powerful tool to sharpen their competitive edge, increase their sector influence, and enhance their reputation as market innovators.[2] With today’s competitive environment, many smaller businesses are emulating the success of big business by utilizing IP.

What Is Intellectual Property?

To many people the term “intellectual property” remains a mystery – some obscure legal concept of little relevance to everyday life. Lack of awareness about IP is understandable because, in the past, it was an esoteric field of law often reserved for discussions between technical specialists and corporate lawyers. Times have changed. The information technology revolution, and the increasing pace, impact, and importance of invention and innovation, linked to rapid globalization, have brought IP onto center stage. As a result, IP is now a key factor in corporate strategic planning and should be an important factor in your business.

Intellectual property (IP) are legal property rights over creations of the mind, both artistic and commercial, and the corresponding fields of law. Under IP law, owners are granted certain exclusive rights to a variety of intangible assets.

The government protects these property rights because they know safeguarding these rights fosters economic growth, provides incentives for technological innovation, and attracts investment that creates new jobs and opportunities for all. In essence, the government grants you a legal monopoly to grow your business. Economists estimate that two-thirds of the value of large businesses in the U.S. can be traced to intangible assets.[3]

How Can I Make Money With Intellectual Property?

The main purpose behind registering your intellectual property is to protect your business. However, typically one of the benefits of being proactive with IP protection is the ability to generate additional income. First off, your business will look more professional by owning intellectual property. This allows the opportunity to attract investors by building a strong “brand” presence and protecting your business from competition. The risk to the investor is lower and the overall value of the business may be increased. If your business owns IP that it does not need to exclusively use, you have the option to license the use of the IP to others. The licensing agreement can be constructed numerous ways depending on the use and compensation arrangement. Another option is to sell or buy IP. Owning IP that you do not need is sometimes a good thing as someone else may have the need for it and might be willing to pay more than you think. And, finally, when the time comes to retire or sell your business, it will hold a higher value due to the IP and goodwill built up over prior years.

In sum, intellectual property is something that should not be an afterthought in your business. Being proactive with IP can not only prevent pitfalls in the growth and operation of your business, but can allow you to maximize your growth potential and increase your business valuation. Intellectual property is an asset which protects your business from competition, increases revenue and profitability, and differentiates your company from the rest of the competitive marketplace.

[2] The accounting firm, PricewaterhouseCoopers, estimates that two thirds of the US $7 trillion market value of all US public companies is not reflected on their balance sheets because it lies in their intangible assets, such as intellectual property.

[3] According to a July 2007 report entitled “Economic Effects of Intellectual Property.”